The word refers to a famous 1956 paper by George A. Miller, The Magical Number Seven, Plus or Minus Two : Some Limits on our Capacity for Processing Information. At a time when information theory was beginning to be applied in psychology, Miller observed that whereas some human cognitive tasks fit the model of a "channel capacity" characterized by a roughly constant capacity in bits, short-term memory did not. A variety of studies could be summarized by saying that short term memory had a capacity of about "seven plus-or-minus two" chunks. Miller wrote that "With binary items the span is about nine and, although it drops to about five with monosyllabic English words, the difference is far less than the hypothesis of constant information would require. The span of immediate memory seems to be almost independent of the number of bits per chunk, at least over the range that has been examined to date." Miller acknowledged that
"we are not very definite about what constitutes a chunk of information."

Miller noted that according to this theory, it should be possible to effectively increase short-term memory for low-information-content items by mentally recoding them into a smaller number of high-information-content items. "A man just beginning to learn radio-telegraphic code hears each dit and dah as a separate chunk. Soon he is able to organize these sounds into letters and then he can deal with the letters as chunks. Then the letters organize themselves as words, which are still larger chunks, and he begins to hear whole phrases." Thus, a telegrapher can effectively "remember" several dozen dits and dahs as a single phrase. Naive subjects can only remember about nine binary items, but Miller reports a 1954 experiment in which people were trained to listen to a string of binary digits and (in one case) mentally group them into groups of five, recode each group into a name (e.g "twenty-one" for 10101), and remember the names. With sufficient drill, people found it possible to remember as many as forty binary digits. Miller wrote:

"It is a little dramatic to watch a person get 40 binary digits in a row and then repeat them back without error. However, if you think of this merely as a mnemonic trick for extending the memory span, you will miss the more important point that is implicit in nearly all such mnemonic devices. The point is that recoding is an extremely powerful weapon for increasing the amount of information that we can deal with".

This kind of recoding is now often called chunking.

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Various kinds of memory training systems and mnemonics include training and drill in specially-designed recoding or chunking schemes. Such systems existed before Miller's paper, but there was no convenient term to describe the general strategy. The term "chunking" is now often used in reference to these systems.